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This post is second in the two-part commemoration of Capital’s 150th anniversary (last year); part I was a commentary on Francis Wheen’s biography of Capital and Part II undertakes a critical engagement with Wage-Labour and Capital (available freely at Marxists.org), which were originally lectures, and later published as a set of articles in 1849 in the Neue Rheinische Zeitung (which roughly translates into the ‘New Rhenish Newspaper’). Marx had delivered the lectures at the German Working Men’s Club of Brussels in 1847, a year before the publication of the Communist Manifesto and twenty years before the publication of Das Kapital.

Wage-Labour and Capital is made up of 9 short chapters, with the largest chapter containing 5 pages, and a total of 48 pages. In the introduction, F. Engels provides his reasons for altering the original text of Marx, and writes “this pamphlet is not as Marx wrote it in 1849, but approximately as Marx would have written it in 1891” (p. 6). To assess the merits of Engel’s editorial intervention, one needs to compare it with Marx’s original. Marx intended his writings to be understood by the workers and therefore they do not “presuppose a knowledge of even the most elementary notions of political economy” (p. 16).

In capitalism, according to Marx, “it appears that the capitalist buys their labour with money, and that for money they sell him their labour. But this is merely an illusion. What they actually sell to the capitalist for money is their labour-power” (p. 17). Therefore, labour-power “is a commodity, no more, no less so than is the sugar. The first is measured by the clock, the other by the scales” (p. 17). And wages is the “special name for the price of labour-power”, a “peculiar commodity”. The wage-workers, who owns labour-power, does not really have a choice in deciding whether to sell it to the capitalist or not, but is forced to “in order to live” (p. 19). While it appears that the worker has a choice, in essence, she does not (this idea can help transform the dominant labour-leisure trade-off story). Then Marx points out that this feature – the idea of free labour – is particular to capitalism, and not found in slave or feudal societies. While the worker owns labour-power, the capitalist owns “raw materials, tools, and means of life” (p. 20). The following description of work (and life) deserves to be quoted in full.

“Life for him begins where this activity [work] ceases, at the table, at the tavern, in bed. The 12 hours’ work, on the other hand, has no meaning for him as weaving, spinning, boring, and so on, but only as earnings, which enable him to sit down at a table, to take his seat in the tavern, and to lie down in a bed.” (p. 19)

Subsequently, Marx discusses the determination of commodity prices, which contains an account of competition. The latter is studied in three parts: “among the sellers”, “among the buyers”, and “between the buyers and the sellers” (p. 21). It is this competition which seeks the highest “customary profits” among the different sectors, and this constant “immigration” (p. 23) tends to equalise the rate of profits across sectors. This force of competition also tends to bring the actual price of a commodity close to its “cost of production” (p. 24). The “fluctuations” occasioned by competition is not an “accident” or exception but the “law” contrary to the accounts of the “bourgeois economists” (p. 24). Thus, “In the totality of this disorderly movement is to be found its order” (p. 24).

Wages are regulated by the cost of production of labour-power, which “is the cost required for the maintenance of the labourer as a labourer, and for his education and training as a labourer” (p. 26). In other words, it is “the cost of the existence and propagation of the worker” (p. 27). Here, Marx is referring to the wages for the entire class of workers and not of an individual worker because “millions of workers, do not receive enough to be able to exist and to propagate themselves” (p. 27).

Most economists define capital as produced means of production, and this is the starting point of their analysis. But Marx pushes the starting point further and rightly labels capital as “accumulated labour”, as the raw materials, instruments, and machines were also created by labour. Capital is also a “social relation of production” (p. 29). As noted earlier, the existence of wage labour is a characteristic of capitalism where workers are forced to sell their labour power to the capitalist in order to live. And as Marx writes, “The existence of a class which possesses nothing but the ability to work is a necessary presupposition of capital” (p. 30). Furthermore, capital, or accumulated labour dominates living labour.

Mainstream (marginalist) economics is built on the marginal productivity theory of distribution which states that under conditions of perfect competition, in equilibrium, workers are paid the marginal product of capital and capitalists get the marginal product of capital – a harmonious explanation of income distribution. In contrast, Marx argues that wages are profit are inversely related pointing to the fundamental conflict characterising income distribution in a capitalist society (p. 37). In the same chapter (VII), Marx outlines two major routes through which profits increase: (1) increase in aggregate demand and (2) technological improvements (see an earlier post on the link between demand, profits, and employment). In the following chapter, Marx reiterates the distributional conflict: “the interests of capitals and the interests of wage-labour are diametrically opposed to each other” (p. 39). And “If capital grows rapidly, wages may rise, but the profit of capital rises disproportionately faster. The material position of the worker has improved, but at the cost of his social position. The social chasm that separates him from the capitalist has widened” (p. 40). This underscores the social nature of economic relations, an aspect which marginalist economics has eschewed with its assumption of the independence of individual preferences.

The following remark about economists by Marx is appropriate for our current times: “The economists tell us, to be sure, that those labourers who have been rendered superfluous by machinery find new venues of employment” (p. 45). I shall end this post by quoting Marx on capitalist accumulation, crises, and exploitation of markets, since it continues to remain relevant today.

“…capitalists are compelled … to exploit the already existing gigantic means of production on an ever-increasing scale, and for this purpose to set in motion all the mainsprings of credit, in the same measure do they increase the industrial earthquakes, in the midst of which the commercial world can preserve itself only by sacrificing a portion of its wealth, its products, and even its forces of production, to the gods of the lower world – in short, the crises increase. They become more frequent and more violent, if for no other reason, than for this alone, that in the same measure in which the mass of products grows, and therefore the needs for extensive markets, in the same measure does the world market shrink ever more, and ever fewer markets remain to be exploited, since every previous crisis has subjected to the commerce of the world a hitherto unconquered or but superficially exploited market” (pp. 47-8)

The Union Budget is a key document which informs the public about the Government’s socio-economic plans and priorities. It is important to critically evaluate this document because of our collective ‘failure to provide for full employment’ and the ‘arbitrary and inequitable distribution of wealth and incomes’; Keynes wrote this in 1936 and it continues to remain the same. Moreover, it is our collective right and responsibility to decide how the government should obtain its revenue and how it must be spent. No formula or algorithm exists for this. As Piketty wrote in his Capital in the Twenty-First Century, ‘Taxation is not a technical matter. It is preeminently a political and philosophical issue, perhaps the most important of all political issues. Without taxes, society has no common destiny, and collective action is impossible.

This blog post aims to outline the priorities of the current central government by examining the expenditure on physical and social infrastructure and the nature of taxes. This is done in 5 charts.

(1) Physical Infrastructure

Defence is significantly more important than roads, housing, food, and farmers’ welfare.

Capital Expenditure of Select Central Ministries (in Rs. Crore)

Source: Expenditure Budget Vol. 1, 2016-17, Statement 2, pp 4-9

All values are rounded off to the nearest crore.

(2) Social Infrastructure

Physical infrastructure creation is more important than social infrastructure creation.

Have the negative effects of physical infrastructure creation been accounted for?

Total Allocations of Select Ministries (Rs. 112753 Crore)

Source: BS, p 36, Annex No. III-A to Part A

RE refers to revised estimates which include supplementary demands for funds made by the ministries during the financial year.

BE refers to budget estimates.

(3) Direct & Indirect Taxes

Our taxation policy is regressive due to the high proportion of indirect taxes.

Select Direct and Indirect Taxes (in Rs. Crore)

Source: Receipts Budget, 2018-2019, pp. 2-4

(4) Corporate Tax Concessions

Our tax concessions could approximately fund 75% of the social infrastructure spending estimate.

(5) Corporate Tax Structure

Our corporate taxes are regressive.

Source: Statement of Revenue Impact of Tax Incentives under the Central Tax System: Financial Years 2014-15 and 2015-16, p 30 of the Receipts Budget, 2016-2017, Annex-15.

1 Values rounded off to the nearest integer; hence the total adds up to 101 and not 100. Financial year 2012-13. The number of companies whose PBT is zero is 17,912 and their share in total income is around 9 per cent.

Concluding comments

Our government prioritises defence over agriculture. Our government prioritises physical infrastructure over social infrastructure and does not take into account ecological damage and the displacement caused due to physical infrastructure creation. And our taxation policy is regressive. We must use our collective rights and responsibilities to decide how the government should obtain its revenue and how it must be spent.

Acknowledgement

I thank Rahul Lahoti for inviting me to be a part of the panel which discussed the Union Budget at Azim Premji University-Undergraduate Campus on 14th February 2018, from which this post originated.

Although I had read the three volumes of Capital, three parts of Theories of Surplus-Value, and Grundrisse over the course of my PhD research, all of them merit rereading and I ought to read Marx’s other works. Hence, given that 2017 marks the 150th anniversary of Capital, Volume 1 (first published in 1867), I decided to commemorate it by reading a work of Marx I hadn’t read – Wage-Labour and Capital – and a short biography of Capital by Francis Wheen (2006). I shall present my commentary in two parts as it is too lengthy for one post. Part I is a commentary on Wheen 2006, and part II is on Wage-Labour and Capital.

Wheen’s biography of Capital is just about 125 pages. Marx’sDas Capital: A Biography is a three chaptered book dealing with the gestation, birth, and afterlife of Das Capital.

Marx, the studious worker

According to Wheen, ‘Marx’s character was a curious hybrid of ferocious self-confidence and anguished self-doubt’ (p. 3). It was ‘only after many years of spadework in philosophy and literature’ that Marx turned to the study of political economy (p. 7). At the age of seventeen, Marx precociously wrote in a schoolboy essay: “Our relations in society have to some extent already begun to be established before we are in a position to determine them” (p. 8). [Wheen’s excerpts from Marx which I quote are in “double quotes” and those by Wheen are in ‘single quotes’.]

The reader gets to appreciate Marx’s style of studying from Wheen’s scattered references across the book. Marx had the habit of noting down extracts from all the books he read while at the university. And he read widely. As Wheen writes, ‘This is the same eclectic, omnivorous and often tangential style of research which gave Das Capital its extraordinary breadth of reference’ (pp. 10-11). His use of dialectic is influenced by his early study of Hegel’s (1770–1831) ‘pursuit of contradictions’. He had taken the idea that ‘people create the constitution’ from Ludwig Feuerbach (1804–1872), the German philosopher; Feuerbach had argued that ‘thought arises from being, and not being from thought’ (p. 13). Therefore, humans have to assert themselves as subjects and not as mere objects of capitalism. And to thoroughly engage with the land question, Marx thought it ‘essential to study Russian land-owning relationships from primary sources’ (p. 37). Marx’s data sources included ‘newspapers, parliamentary commissions, factory inspectors and copies of Hansard’ (p. 51); Hansard contains ‘edited verbatim report of proceedings of both the House of Commons and the House of Lords’. Marx’s data on child labourers were taken from English match factory records. [On the importance of using a wider set of data, see English for Economists: Sowvendra’s ‘The Adivasi Will Not Dance’.]

Already well versed in German Philosophy and French politics, Marx set out to educate himself in British economics. As he went along, he kept taking copious notes. These notes, which formed the early rough draft of Das Capital, are commonly known as the Paris manuscripts, published as Economic and Philosophic Manuscripts of 1844 (available for under Rs. 200 from Aakar Books and freely available at Marxists.org).

Marx worked extremely hard. He spent most of 1850-1 in the British Museum reading past issues of The Economist and books on economics. He sat in the Museum’s reading room from 9 AM to 7 PM. In the winter of 1857-8, he used to sit in his study until about 4 AM. When he realised that his ‘rudimentary arithmetic’ would prove inadequate in his economic studies, he undertook a ‘quick revision course in algebra’ (p. 27). Marx felt that his study of algebra was necessary “for the benefit of the public”. His ‘nocturnal scribblings’, as Wheen describes them, running to more than 800 pages were published in German in 1953 entitled Grundrisse der Kritik der Politischen Oekonomie (popularly known today as simply Grundrisse). And the notes he took in 1862 and 1863 filled more than 1500 pages (p. 32); this was posthumously published as Theories of Surplus-value.

Marx’s intellectual corpus in political economy

Here is a succinct timeline of Marx’s key works in political economy. At the same time, this is also a timeline of how Marx’s thinking evolved to culminate in Capital.

1847: Wage-Labour and Capital {lectures; published as a set of articles in 1849}

1848: Communist Manifesto (political pamphlet; with Engels)

1857-8: Grundrisse {notes; posthumously published}

1859: A Contribution to the Critique of Political Economy {Marx’s first book}

1862-3: Theories of Surplus-Value {notes; posthumously published}

1865: Value, Price and Profit {speech; posthumously published}

1867: Capital, vol. 1 {Marx’s second book} (second edition in 1873)

The first manuscript in Economic and Philosophic Manuscripts of 1844 begins with the following sentences: “Wages are determined by the fierce struggle between capitalist and worker. The capitalist inevitable wins. The capitalist can live longer without the worker than the worker can without him” (p. 14). This struggle is also found in Adam Smith’s Wealth of Nations. In capitalism, Marx writes that, productivity rises by transforming the worker’s “lifetime into working time, and … [by dragging] his wife and child beneath the juggernaut of capital” (p. 15).

Marx’s ‘first small book’ is A Contribution to the Critique of Political Economy. It was first published in 1859 (in German). [I took the phrase “the first small book” from Maurice Dobb’s introduction to the 1979 English translation brought out by Progress Publishers.] Marx had earlier intended to call Das Capital ‘A Contribution to the Critique of Political Economy, Volume II’ (p. 33). It was Engels who compiled, edited, and published volumes II and III of Capital in 1885 and 1905 respectively; see Regina Roth’s work which argues that these interventions were often significant. The Theories of Surplus-Value, sometimes called volume IV of Capital, was published by Karl Kautsky in 1905.

Capital: key ideas

In capitalism, commodity carries a specific meaning. Even today, a commodity, at the first sight, appears to be a ‘trivial thing’ (p. 42). Fetishism is the ‘belief that commodities have some mystical intrinsic value’ (p. 43). Instead, the value of commodities, for Marx, owes to the value labour provides. The wages of the workers are determined by subsistence wages, a social and cultural variable unlike in neoclassical (more accurately, marginalist) economics where it is determined by the marginal product of labour (and is a labour clearing wage, that is, there is full employment of labour). Subsistence wages includes ‘education and training’ (p. 49). As Wheen writes, ‘Marx has no illusions about the supposedly sacred symmetry of the law of supply and demand’ (p. 55) which is central to marginalist economics. Indeed, as Wheen notes, ‘The only difference from previous epochs is the guile with which the robbery is concealed from the victims’ (p. 50).

The relation between technological progress and better living standards or higher wages is not as straightforward as in the marginalist growth models of Solow and Romer. In contrast to these models, Marx concludes that greater the productivity, greater is the labour unemployment (p. 56). Thus, Marx writes, “It follows therefore that in proportion as capital accumulates, the situation of the worker, be his payment high or low, must grow worse” (p. 57). For Marx, poverty “is about the crushing of the human spirit” (p. 58). In an article published in the New York Review of Books, Jeff Madrick observes: “people of all racial and ethnic groups are losing confidence in the core American principle that hard work is a means to upward mobility.” And as Wheen notes, ‘The average British employee now puts in 80,224 hours over his or her working life, as against 69,000 hours in 1981. … many people have no time for anything beyond labour and sleep’ (p. 59). The effects of technological progress or rising productivity has been very uneven.

What causes crises in capitalism? According to Marx, “The last cause of all real crises always remains the poverty and restricted consumption of the masses” relative to private investment (p. 61). This key idea resurfaced with vigour in the twentieth century in the seminal works of Michal Kalecki and John MaynardKeynes.

Capital’s afterlife

In the Preface to Capital, Marx writes, “I assume, of course, a reader who is willing to learn something new and therefore to think for himself” (pp. 82-3). Undoubtedly, since its first publication, Capital has enabled many individuals to know the capitalist order better. George Bernard Shaw articulates this view clearly: ‘Das Kapital achieved the greatest feat of which a book is capable – that of changing the minds of the people who read it’ (p. 90). However, the initial reception to its publication was ‘muted’. Wheen thinks that it was ‘sheer incomprehension’ and not ‘political enmity’ which explains the ‘muted reaction’ to the publication of Capital.

As Sir John MacDonnell wrote in the Fortnightly Review (March 1875): ‘People may do him the honour of abusing him; read him they do not! (p. 87). Resorting to an ‘authority’ for support without proper reasoning is always troubling. Wheen notes how during the 1917 Russian revolution, the ‘architects … all cited Marx, and Das Kapital in particular, as the divine authority for the correctness of their views’ (p. 98).

Unfortunately, mainstream economics still views income distribution as a harmonious process. That income distribution is a process characterised by conflict and power relations has been ignored, and perhaps even intentionally supressed. These ideas continue to be studied and researched by ‘heterodox’ economists working in the Classical, Marxian, and Keynesian traditions. And one must not confuse ‘new political economy’ with the political economy found in the works of Smith, Ricardo, and Marx. It is interesting to note that before the 2007 Global Financial Crisis, economists looked down upon ‘political economy’ but after the crisis, the number of mainstream economists who started doing ‘political economy’ rapidly increased.

Conclusion

Marx’s Capital remains one of the most insightful studies on capitalism. With all the strides in technological progress with respect to global value chains, transnational corporations, industry automation, etc., reading Marx’s Capital enables the reader to see the cells of the capitalist order – impoverished workers.

The logic of contemporary economies is built on our belief in the virtues of ‘free’ individual choice. Adherents of this view, which include (most) governments, corporations and many individuals, believe that regulating individual choice is bad for the economy. However, among this syndicate, some do recognise the pitfalls of employing this principle in the development and growth of institutions relating to education and health. In economic parlance, the ‘failure’ of individual choice in yielding a socially beneficial outcome is termed a market failure – suggesting that markets, in general, do not fail. It is important to state the logic of individual choice explicitly owing to its enthralling grip over contemporary political and economic imagination. John Maynard Keynes in his 1926 critical essay ‘The End of Laissez-Faire’ makes explicit this logic: ‘by the working of natural laws individuals pursuing their own interests with enlightenment, in condition of freedom, always tend to promote the general interest at the same time!’

How did private vice transform into private interest (and choice)? And how is it that private choice is at the core of today’s economics and politics? Albert Hirschman’s The Passions and Interests:Political Arguments for Capitalism Before its Triumph (1977) provides us with one compelling historical account. The idea that free individual choice results in socially beneficial outcomes is now commonplace. This was not always the case. In fact, Montesquieu, the French philosopher, wrote about the socially beneficial outcomes from pursuing honour which ‘brings life to all the parts of the body politic’ and ‘it turns out that everyone contributes to the general welfare while thinking that he works for his own interests.’ By the seventeenth century, it was recognised that the ‘disruptive passions of men’ could not be restrained by moral philosophers and their religious counterparts although attempts to convert the disruptive passions into ‘constructive’ passions were already underway. For instance, anticipating Adam Smith, Pascal, another French philosopher, writes that man ‘has managed to tease out of concupiscence an admirable arrangement’ and ‘so beautiful an order.’ Subsequently, the idea of ‘countervailing passions’ started gaining currency in political thought. However, as Hirschman also notes, what forces actually ensure that groups (of individuals) with conflicting passions/interests result in a gain for all? If the contemporary politics of climate change is taken as an example, the outcome runs contrary to such an expectation.

Today, the widespread belief especially among policy makers is that unregulated individual choices – whether as a consumer or a producer – will ensure that the fruits of economic growth trickle down to the poorest person. However as Keynes warned us very persuasively in The General Theory of Employment, Interest and Money (1936), this belief is flawed and we need government intervention so as to eliminate labour unemployment. Clearly, the pursuit of individual gains has not brought social gains. Mainstream economics accommodates this big flaw in marginalist economics under the label of externalities. Unintended consequences of economic actions may be positive or negative for the society. In the determination of output and employment, Keynes pointed out that the tendency towards full employment (a more modest claim than public interest or social welfare) is a fluke in liberal capitalism. To put it differently, unemployment of labour is the expected consequence in liberal capitalism.Both theoretically and empirically, all evidence points to one inescapable fact: liberal capitalism does not result in the full employment of labour. Another charge by Keynes against this view is that it commits the fallacy of composition: what is good for an individual may not be good for the society. For example, while saving is good for an individual, if all individuals in a society save, who will consume the output?

Amitav Ghosh in The Great Derangement: Climate Change and the Unthinkable (2016), his recent* work of non-fiction, forcefully argues that the paralysis of climate change politics lies in our idea of individual freedom; our ‘calculus of liberty’ has no place for nature and natural systems. How then can our idea of freedom – a product of Enlightenment thinking – and its close relative, democracy, ever effectively address our environmental issues? A solution to our environmental problems warrants collective and concerted action. This is consistently absent in current politics, which has been reduced to individual morals and choices. Indeed, the onus of resisting environmental degradation has been passed on to the individual by appealing to her morals. As Ghosh puts it in his The Great Derangement, ‘This then is the paradox and the price of conceiving of fiction and politics in terms of individual moral adventures: it negates possibility itself.’ Both fiction and politics, at their core, are, or rather, ought to be about possibilities –possibilities for the individual as well as the society as a whole.

The idea that free pursuit of individual interest yields a socially beneficial outcome is a flawed piece of political and economic imagination. Unfortunately, this principle does not function in today’s capitalist societies and the belief that it does is a dangerous one to safeguard. The idea that free individual choices yield socially beneficial outcomes must therefore be challenged in all possible spaces committed to documenting and exploring socioeconomic possibilities, particularly in humanities, journalism, literature, and the social sciences.

*I thank Vivek Nenmini for pointing out an error. Earlier, I had written that The Great Derangement is Ghosh’s first work of non-fiction.